Join Eddie Davila for an in-depth discussion in this video Transportation and logistics, part of Business Foundations.
- In just the last few years, the term "logistics" has gotten very popular. Global companies like DHL, UPS, and FedEx are known as logistics companies. But what exactly is logistics? I mean, is it just getting finished goods to a customer's home, or perhaps, to a store where these goods can be put on a shelf ready for purchase? Yeah, that's logistics, but it's just a small part of what the world of logistics encompasses. You see, logistics doesn't just happen in the last mile before a product gets to the hands of the user.
Logistics happens before a product is even made. Even in the most simple supply chains, raw material and components are shipped to manufacturers. Finished goods are shipped to distribution centers. And from there, products make their way to a retail store or an online retailer's picking and packing warehouse where, finally, they can be shipped to your home. All along the way, there are important decisions to be made that will impact whether the shipment was quickly delivered, safely, on-time, in the right amount, and, of course, at a reasonable cost.
Plus we want to know that our logistics process is flexible. Big orders, small orders, perishable products, heavy products, dangerous goods, orders destined for big cities, and others heading towards a farm. Domestic orders and foreign orders. And, nowadays, customers want to be informed. Customers want to have the ability to track their shipments. Marketing and manufacturing are important, but a great product that comes with a big shipping cost, and then arrives late, damaged, or to the wrong address ruins the customer experience.
As a result, logistics specialists are constantly making decisions that must make customers happy and keep the company profitable. So how can a logistics manager keep the company profitable? Keep inventories low, move inventory as quickly as possible and at the lowest possible cost. Empty trucks and containers waste fuel so keep trucks and containers full by planning effectively. And don't get caught unprepared. Stock-outs, rushed shipments, and shipping errors are extremely expensive and can mean the loss of a customer forever.
So in the end, logistics managers are tasked with making all sorts of decisions that balance cost, speed, and customer satisfaction. What types of decisions? Well, should we use a truck, train, ship, or plane? What type of packaging is need to keep the items safe? They also consider storage issues like: What's better, having high-levels of long-term inventory sitting in a warehouse, or low-levels of inventory moving quickly through distribution centers? And, if you're shipping globally, you'll need to consider issues like import and export laws, tariffs, and documentation.
You see, logistics is about a lot more than delivery. Oh, and don't forget, materials don't just move in the direction of the customer. Reverse logistics deals with returned items, items requiring repair that need to be sent to a repair center, and reusable and recyclable packaging. As companies look to control cost, reduce waste, and eliminate product loss, while still getting the right good to the right place at the right time, companies need to consider all of the pieces of the logistics puzzle.
Logistics is beneficial for everyone involved. Customers get what they want, how they want, and when they want it. And companies can make it all happen with minimal cost and waste. Now that you have a better understanding of some of the vital pieces of the logistics puzzle, think about which pieces your company may not be considering.
He also reviews the basics of the people side of business: managing employees and developing customer relationships. Last, he covers the financial and information management aspects of business and provides a basic explanation of economics, so that you can understand the relationship of your business to the bigger picture.
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- Understanding business goals, stakeholders, and resources
- Developing a product or service
- Selling a product or service
- Raising capital
- Managing employees
- Managing customer data
- Understanding finances
- Managing resources
- Understanding economics